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ABI attacks pension charges ‘myth’

The Association of British Insurers says it is a “myth” that pension charges are putting people off saving for retirement.

Providers have been subjected to a barrage of criticism over the impact charges have on the value of peoples’ pension pots.

Speaking at the ABI pensions conference in London today, ABI director of life, savings and protection Stephen Gay said: “It is a myth that pension charges put people off saving for retirement. Of the people we surveyed, only 4 per cent said their biggest concern about pensions was management charges.

“If you look at the facts, charges for contract pensions have been heading south for a decade and they are lower than Isas. In fact they are lower than ever before.

“We looked at 95 per cent of the pensions market, covering the default funds of over 100,000 schemes. The best have lower charges than Nest or Now Pensions and the average modern scheme has charges of just 0.52 per cent.”

Aviva UK Life chief executive David Barral said: “Our average annual management charge for a group personal pension scheme is 0.6 per cent, so we would argue that the market is incredibly transparent and fiercely competitive.

“If our product or our service is not good enough, advisers are incredibly quick to punish us.”

However, pensions minister Steve Webb said high charges remain a cause of concern for the Government.

He said: “If you take out a stakeholder pension and you are on a low wage and make intermittent contributions, charges can be 20 per cent of your pension pot. That is a big number. Charges are still an important factor and I certainly would not dismiss the issue.”

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Comments

There are 6 comments at the moment, we would love to hear your opinion too.

  1. Steve Webb is typical tit of a politician, a clueless Civil Servant plucking figures out of the air to suit his purpose on something he clearly knows very little about. Clearly studying poverty, benefits and taxes qualifies you as a Pensions Minister these days. The only way charges can be 20% on a Stakeholder plan is if the plan is running for at least 15 years, which by my calculations makes it 1,33% p.a.

    Given that it was the government that wasted so much money imposing Stakeholder on the Financial industry and then the FSA bleating on about RU64 they can’t now complain when clients are charged more for a Stakeholder plan than they are for a PP.

    If you are so worried about high charges in a Stakeholder contract Webb then scrap them !! High salaries in Westminster paid to inept politicians give me cause for concern so maybe we shall all take a closer look at that !

  2. Re the Pensions Minister’s comments: 20% of not very much is not a big number!

  3. Webb is another clueless Pensions Minister.
    Clearly the main qualification for a Pensions Minister seems to be that they should know nothing about pensions.This man clearly meets the standard .

  4. From my experience, what really puts people off pensions is first that they’re never really yours. You save all your working life and either give your fund away in return for an annuity or you draw and income and then get taxed 55% on death.
    If we, as IFAs, recommended investment products where, when you died, you lost 55% of your fund value we’d be paying out compensation for mis-
    selling.
    The second issue is that the government keeps changing the rules, you can’t have confidence in something where the rules keep changing to your detriment.
    It’s typical though that the useless civil servants blame everyone else for their failure!!

  5. What a shame that virtually every politician and regulator is clueless.

    In my experience clients do not look into charges. Whilst this makes them susceptible to conmen it also means that they do not shy away from saving for that reason.

    After all, think how many General Portfolio, Lincoln and Canterbury Life pensions were sold in the 1990s.

    Comments by Webb and his ilk are used to form policy and subvert opinion. The man really does need a calculator.

  6. The problem with Webb all the theorists and indeed the FSA/Government and even some new model advisers is that they believe everything is price driven – if its cheap people will buy it – its not and never has been !!!

    If it was there’d be a waiting list for stakeholder, cash ISAs and dec term assurance.

    Here is another example of everything that is wrong with this industry and yet another clueless fool. it really is hardly surprising we have the biggest savings/pension gap in history and dont tell me its about mis-trust of the IFA (notice I said IFA) I simply dont buy it and the evidence doesnt back it up.

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